SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Ace of 1934
Date of Report (Date of earliest event reported): July 31, 1996
Glasgal Communications, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-20688 94-2914253
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
151 Veterans Drive, Northvale, New Jersey 07647
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 768-8082
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL
INFORMATION AND EXHIBITS
(a) The Registrant hereby amends Item 7 of this Form 8-K by including
the required Financial Statements of HH Communications, Inc., an Illinois
corporation ("HH").
(b) The Registrant hereby amends Item 7 of this Form 8-K by including
the requisite pro forma financial information of the HH acquisition.
(c) Exhibits:
2 Stock Purchase Agreement dated as of July 31, 1996 by
and among Glasgal Communications, Inc., Francis J.
Frazel, Steven M. Grubner, Mark Herzog, George Terlizzi
and HH Communications, Inc. (previously filed on this
Report on Form 8-K).
(20) News Release of Glasgal Communications, Inc. dated
August 1, 1996 (previously filed on this Report on Form
8-K).
23 Consent of Albert & Goodman, Independent Public
Accountants.
99.1 Financial Statements of HH Communications, Inc.
99.2 Pro forma financial information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Ace of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLASGAL COMMUNICATIONS, INC.
By: /s/ James Caci
--------------
James Caci
Chief Financial Officer
Date: September 23, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glasgal Communications, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
report dated September 3, 1996, included in this Form 8-K/A, into the Company's
previously filed Registration Statement, File Numbers 33-87122, 33-94802,
33-93470, 333-08381, 333-03414 and 333-09509.
/s/ ALBERT & GOODMAN
--------------------
ALBERT & GOODMAN
Northbrook, Illinois
September 23, 1996
HH COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995 (AUDITED)
<PAGE>
HH COMMUNICATIONS, INC.
AUDITED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION
DECEMBER 31, 1995
CONTENTS
ACCOUNTANT'S AUDIT REPORT..........................................1
FINANCIAL STATEMENTS
Balance Sheet.................................................2
Statement of Income and Retained Earnings.....................4
Statement of Cash Flows.......................................5
Notes to Financial Statements.................................6
<PAGE>
ALBERT & GOODMAN CERTIFIED PUBLIC ACCOUNTANTS / BUSINESS CONSULTANTS
================================================================================
To the Board of Directors and Stockholders of
HH Communications, Inc.
Chicago, Illinois
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of HH Communications, Inc. as of
December 31, 1995, and the related statements of income, retained earnings and
cash flow for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HH Communications, Inc. as of
December 31, 1995
Albert & Goodman
Certified Public Accountants
/s/ Albert & Goodman
Northbrook, Illinois
September 3, 1996
650 Dundee Road - Suite 170 - Northbrook, Illinois 60062 - PHONE: 708/480-5716 -
FAX: 708/480-9227
-1-
<PAGE>
HH COMMUNICATIONS, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash $ 36,450
Accounts receivable - net of all
doubtful accounts of $27,000 852,048
Stockholder advances - Note F 69,656
Employee advances 300
Prepaid income taxes 2,984
Prepaid insurance 3,906
----------
TOTAL CURRENT ASSETS 965,344
PROPERTY AND EQUIPMENT - Note A
Furniture and equipment 116,777
Leasehold improvements 4,002
----------
120,779
Less: accumulated depreciation 70,458
----------
NET PROPERTY AND EQUIPMENT 50,321
OTHER ASSETS
Deposits 5,000
----------
TOTAL OTHER ASSETS 5,000
----------
TOTAL ASSETS $1,020,665
==========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
-2-
<PAGE>
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 264,612
Accrued expenses 81,283
Note payable - Note B 585,597
Accrued sales commissions 89,583
Accrued sales and payroll taxes 47,706
Note payables - current portion - Note C 41,254
Customer deposits 15,000
-----------
TOTAL CURRENT LIABILITIES 1,125,035
LONG-TERM LIABILITIES
Notes payable - less current portion - Note C 178,905
-----------
TOTAL LONG-TERM LIABILITIES 178,905
STOCKHOLDER'S EQUITY
Common stock, authorized -- 1,000 shares
issued and outstanding -- 1,000 shares 1,050
Retained deficit (284,325)
-----------
TOTAL STOCKHOLDER'S EQUITY (283,275)
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,020,665
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
-3-
<PAGE>
HH COMMUNICATIONS, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
REVENUES
Sales 3,497,168
Commissions earned 762,154
-----------
TOTAL REVENUES $ 4,259,322
COST OF GOODS SOLD
Purchases 2,614,343
Freight 5,023
-----------
TOTAL COST OF GOODS SOLD 2,619,366
-----------
GROSS PROFIT 1,639,956
GENERAL AND ADMINISTRATIVE EXPENSES 1,831,854
-----------
LOSS FROM OPERATIONS (191,898)
OTHER EXPENSE
Interest expense 53,035
-----------
TOTAL OTHER EXPENSE 53,035
-----------
LOSS BEFORE INCOME TAXES (244,933)
INCOME TAXES - Note A
Federal income tax benefit (33,800)
State income taxes benefit (9,800)
-----------
TOTAL INCOME TAX BENEFIT (43,600)
-----------
NET LOSS (201,333)
RETAINED DEFICIT
Beginning of the year (82,992)
-----------
End of the year (284,325)
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
-4-
<PAGE>
HH COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATION ACTIVITIES
Net loss (201,333)
Non-cash items included in net income
Depreciation 11,309
Net (increase) decrease in current assets:
Accounts receivable (548,058)
Stockholder and employee advances (58,936)
Prepaid income taxes 2,991
Prepaid insurance (3,906)
Deposits (5,000)
Net increase (decrease) in current liabilities:
Accounts payable 99,993
Accrued expenses 81,283
Accrued sales commissions 89,583
Accrued sales and payroll taxes 39,556
Customer deposits 15,000
Deferred state income tax (9,800)
Deferred federal income tax (33,800)
---------
NET CASH USED BY OPERATING ACTIVITIES (521,118)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (59,055)
---------
NET CASH USED BY INVESTING ACTIVITIES (59,055)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from line of credit 535,597
Proceeds from term loan 20,000
Repayment on term loan - (stock redemption) (23,988)
---------
NET CASH PROVIDED BY INVESTING ACTIVITIES 531,609
---------
NET INCREASE (DECREASE) IN CASH (48,564)
CASH AT THE BEGINNING OF THE YEAR 85,014
---------
CASH AT THE END OF THE YEAR $ 36,450
=========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
-5-
<PAGE>
HH COMMUNICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of HH Communications, Inc. (the
Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
Management is also responsible for all estimates made on these financial
statements. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
BUSINESS ACTIVITY
The Company, which is located in Chicago, Illinois, is a manufacturers'
representative for the telecommunication industry and is also a value added
re-seller of computer hardware. In addition they also provide service for the
implementation of the above products.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Bad debts are provided on the allowance method based on historical experience
and management's evaluation of outstanding accounts receivable. The allowance
for doubtful accounts is $27,000 at December 31, 1995.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. The cost of property and equipment
is depreciated over the estimated useful lives of the related assets. The costs
of leasehold improvements are depreciated (amortized) over the lesser of the
length of the related leases or the estimated useful lives of the assets.
Depreciation is computed using an accelerated method for both financial
statement and tax reporting purposes. The following is a description of the
major classes of property and their useful lives.
YEARS
-----
Furniture and equipment 5 - 7
Leasehold improvements 7 - 39
Depreciation expense amounted to $11,309 for the year ended December 31, 1995.
Expenditures for major renewals and improvements that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
SEE ACCOUNTANT'S REPORT
-6-
<PAGE>
HH COMMUNICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1995
INCOME TAXES
In February 1992, the Financial Accounting Standards Board adopted Statement of
Financial Standards No. 109, Accounting for Income Taxes, which supersedes
substantially all existing authoritative literature and previously issued income
tax accounting standards. The statement is required to be applied by all taxable
entities for their fiscal years beginning after December 15, 1992, either by
restating prior period financial statements or by recognizing the cumulative
effect of the change in the year of adoption. For its fiscal year ended December
31, 1995 the Company has applied SFAS 109, and its financial statements for the
year ended December 31, 1994 have been restated to conform to the measurement
principles of SFAS 109 as if the Statement had been in effect for that year.
Accordingly, the Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109 which requires the use of the
"liability method" of accounting for income taxes. Deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities, using enacted tax rates in effect for
the year in which the differences are expected to reverse. The Company's
temporary difference is due to the difference in accounting methods used for
book and tax purposes. For tax purposes the Company was reporting on the cash
receipts and disbursements basis of accounting. As of January 1, 1995 the
Company will be using the accrual basis of accounting for both tax and financial
reporting purposes. Current income taxes are based on the year's taxable income
for Federal and state income tax reporting purposes. No current provision is
made for income taxes.
Deferred Federal tax provision (benefit) ($33,800)
Deferred State tax provision (benefit) ( 9,800)
--------
Total 1995 income tax provision ($43,600)
========
NOTE B - REVOLVING LINE OF CREDIT
The Company had a $600,000 revolving line of credit, of which $585,597 was
outstanding at December 31, 1995. Maturity of this revolving line of credit is
March 31, 1996, and bears an interest rate of prime plus one (floating) which
was 9.5% as of December 31, 1995. The line is secured by substantially all
corporate assets and is personally guaranteed by the four principal shareholders
of the corporation.
On March 1, 1996 the Company obtained a working capital line of credit of
$1,250,000. This line of credit is subject to certain debt to equity covenants
and is personally guaranteed by the four principal shareholders of the
corporation. This line of credit expires on April 30, 1997. As of July 31, 1996
the Company was in violation of the debt to equity covenants of the line of
credit agreement.
SEE ACCOUNTANT'S REPORT
-7-
<PAGE>
HH COMMUNICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1995
NOTE C - LONG-TERM DEBT Long-term debt consists of the following:
1995
---------
Note payable to Comerica Bank - Illinois
for the purchase of office furniture
payable in 24 monthly installments of
$833.33 plus interest. The interest rate
in effect is prime plus 1/2 percent,
which was 9.25% as of December 31, 1995.
This note is secured by all corporate
assets and guaranteed by the
shareholders. $ 20,000
Note payable to Harvey Herzog for the
purchase of his interest in the Company.
This note is paid in monthly
installments of $4,000, which includes
interest at a rate of 9%. 200,159
---------
TOTAL LONG TERM DEBT
$ 220,159
LESS-Current maturities included in
current liabilities ( 41,254)
---------
LONG TERM DEBT $ 178,905
=========
Maturities of long-term debt for each of the years succeeding December 31, 1995
are as follows:
1997 $44,186
1998 37,393
1999 40,900
2000 44,737
2001 11,689
NOTE D - BUY-SELL AGREEMENT
In 1994, the Company and its stockholders entered into an agreement regarding
the disposition of the stockholders' shares of the Company's common stock. In
certain instances, as defined in the agreement, a stockholder may dispose of
stock by offering it for sale to the Company and the other stockholders. The
Company has a first option to purchase and, after a period of time, the option
reverts to the other stockholders. The method used for determining the purchase
price is set forth in the agreement.
SEE ACCOUNTANT'S REPORT
-8-
<PAGE>
HH COMMUNICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1995
NOTE D - BUY-SELL AGREEMENT-CONTINUED
As part of the same agreement, upon the permanent disability or death of a
stockholder, the Company or other stockholders will be obligated to purchase the
Company's common stock from the disabled stockholder or from the estate of the
deceased stockholder. The acquisition price is determined in the same manner as
for a disposition of stock. In the event of a disability or death-triggering
event, however, the agreement may be funded by disability or life insurance.
NOTE E - STOCK REDEMPTION
On November 1, 1987, the Company entered into a redemption agreement with a
stockholder. The Company agreed to repurchase all of the stockholder's shares
for $315,767. This note is payable in 120 consecutive installments of $4,000,
which includes interest at a rate of 9%, starting January 15, 1992. The bank
classifies the note as equity in the calculation of loan compliance ratios. The
repurchased shares were retired, and the cost of these shares were closed out
through retained earnings.
NOTE F - RELATED PARTY TRANSACTIONS
Loans receivable from the stockholders of the Company were $69,656 as of
December 31, 1995. These loans are payable on demand and bear no interest.
NOTE G - LEASE COMMITMENTS
As of December 31, 1995, the Company leased office space and several automobiles
under various non-cancelable operating leases. Future minimum lease payments
required under the operating leases are as follows:
YEARS ENDING DECEMBER 31,
-------------------------
1996 $66,924
1997 66,053
1998 58,663
1999 61,513
2000 36,575
--------
Total minimum lease payments $289,728
========
NOTE H - PROFIT SHARING AND 401(K) SAVINGS PLAN
The Company has enacted a defined contribution plan (401K plan) as of December
31, 1995. No employee or employer contributions have been made during this
period. Contributions to this plan will begin during fiscal year 1996.
SEE ACCOUNTANT'S REPORT
-9-
<PAGE>
HH COMMUNICATIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1995
NOTE I - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes are as follows:
1995
----
Interest $53,035
Income taxes $ 4,218
NOTE J - MAJOR CUSTOMER INFORMATION
During the year, the Company has diversified its customer base. Sales to their
top four customers totaled approximately $1,825,000 which represented
approximately 40% of their net revenue.
NOTE K - MAJOR VENDOR INFORMATION
During the year the Company purchased approximately $2,360,000 worth of goods
from five vendors representing approximately 90% of total goods purchased during
the year.
NOTE L - SUBSEQUENT EVENTS
On July 23, 1996 the four individual shareholders of HH Communications, Inc.
assumed the debt that was due to Harvey Herzog (see Note C and Note E).
Immediately upon assuming the debt, the shareholders relieved the Company of the
obligation by making a contribution of capital in the amount of the debt.
On July 31, 1996 all outstanding shares of HH Communications, Inc. were acquired
by Glasgal Communications, Inc. which is a publicly traded company. The
shareholders of HH Communications, Inc. received 1,500,000 unregistered common
shares of Glasgal Communications, Inc. in exchange for the 1,000 issued and
outstanding shares of HH Communications, Inc., which represented 100% of the
outstanding shares of HH Communications, Inc. on July 31, 1996.
Simultaneous with the acquisition, the former shareholders of the Company
entered into employment agreements with HH Communications, Inc. which have a
term from July 31, 1996 through July 31, 1999. In addition the former
shareholders of HH Communications, Inc. entered into restrictive covenant
agreements for the term of the employment agreement.
SEE ACCOUNTANT'S REPORT
-10-
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
acquisition of HH Communications, Inc., being accounted for using the pooling of
interests method of accounting. To acquire HH Communications, Inc., Glasgal
issued 1,500,000 shares of its common stock. Immediately following the
acquisition Glasgal Communications, Inc. has 16,341,162 shares of common stock
issued and outstanding.
The following pro forma financial statements are included:
o Balance sheet at July 31, 1996
o Balance sheet at April 30, 1996
o Statement of operations for the three months ended July 31,1996
o Statement of operations for the year ended April 30, 1996
o Statement of operations for the year ended April 30, 1995
o Statement of operations for the four month period ended April 30, 1994
o Statement of operations for the year ended December 31, 1993
This fiscal year end of Glasgal Communications, Inc. was December 31, until May
2, 1994, at which time the year end was changed to April 30. The fiscal year end
of HH Communications is December 31. The pro forma statements of operations for
the years ended April 30, 1996 and 1995 noted below include the statement of
operations of HH Communications, Inc. for the twelve months ended April 30, 1996
and 1995. The pro forma statement of operations for the period ended April 30,
1994, includes the results of HH Communications, Inc. for the four months ended
April 30, 1994.
<PAGE>
GLASGAL COMMUNICATIONS INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
FOR YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
ASSETS
- -----------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ (155,930) $ 185,387 $ 29,457
Account receivable, net 7,544,996 1,595,794 $ 9,140,790
Inventory 2,520,816 146,712 $ 2,667,528
Prepaid expenses and other current assets 723,603 191,210 $ 914,813
------------ ------------ ------------
Total current assets 10,633,485 2,119,103 $ 12,752,588
PROPERTY AND EQUIPMENT, NET 3,604,280 78,952 $ 3,683,232
GOODWILL 1,866,967 -- $ 1,866,967
OTHER ASSETS 181,084 5,000 $ 186,084
------------ ------------ ------------
Total assets $ 16,285,816 $ 2,203,055 $ 18,488,871
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
------------
CURRENT LIABILITIES:
Short-term borrowings $ 2,527,866 $ 168,797 $ 2,696,663
Current portion of long term
obligations 128,655 37,921 166,576
Accounts payable 4,529,529 877,240 5,406,769
Accrued liabilities 1,350,701 224,300 1,575,001
Deferred income 414,390 81,386 495,776
Other current liabilities
------------ ------------ ------------
Total current liabilities 8,951,142 1,389,644 10,340,786
------------ ------------ ------------
LONG-TERM OBLIGATIONS 10,014 978,821 988,835
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock -- -- --
Common stock 16,574 1,050 17,624
Additional paid-in capital 11,970,987 -- 11,970,987
Accumulated deficit (4,534,699) (166,460) (4,701,159)
Cumulative translation adjustment (128,201) -- (128,201)
------------ ------------ ------------
Total shareholders' equity (deficit) 7,324,662 (165,410) 7,159,252
------------ ------------ ------------
Total liabilities and shareholders' equity
(deficit) $ 16,285,816 $ 2,203,055 $ 18,488,871
============ ============ ============
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
FOR YEAR ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
ASSETS
- ------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 579,087 $ 185,387 $ 764,474
Account receivable, net 6,505,947 1,595,794 8,101,741
Inventory 2,655,452 146,712 2,802,164
Prepaid expenses and other current assets 739,665 191,210 930,875
------------ ------------ ------------
Total current assets 10,480,151 2,119,103 12,599,254
PROPERTY AND EQUIPMENT, NET 3,629,554 78,952 3,708,506
GOODWILL 1,866,967 -- 1,866,967
OTHER ASSETS 274,810 5,000 279,810
------------ ------------ ------------
Total assets $ 16,251,482 $ 2,203,055 $ 18,454,537
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
------------
CURRENT LIABILITIES:
Short-term borrowings $ 1,915,467 $ 168,797 $ 2,084,264
Current portion of long term
obligations 93,332 37,921 131,253
Accounts payable 4,804,234 877,240 5,681,474
Accrued liabilities 574,454 224,300 798,754
Deferred income 620,734 81,386 702,120
Other current liabilities 1,643 -- 1,643
------------ ------------ ------------
Total current liabilities 8,009,864 1,389,644 9,399,508
------------ ------------ ------------
LONG-TERM OBLIGATIONS 1,088,370 978,821 2,067,191
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock -- -- --
Common stock 14,841 1,050 15,891
Additional paid-in capital 11,693,354 -- 11,693,354
Accumulated deficit (4,434,817) (166,460) (4,601,277)
Cumulative translation adjustment (120,130) (120,130)
------------ ------------ ------------
Total shareholders' equity (deficit) 7,153,248 (165,410) 6,987,838
------------ ------------ ------------
Total liabilities and shareholders' equity
(deficit) $ 16,251,482 $ 2,203,055 $ 18,454,537
============ ============ ============
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THREE MONTHS ENDED JULY 31, 1996
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
NET SALES
Equipment $ 7,960,684 $ 3,057,037 $ 11,017,721
Services 1,832,173 260,250 2,092,423
------------ ------------ ------------
9,792,857 3,317,287 13,110,144
------------ ------------ ------------
COSTS AND EXPENSES
Cost of Sales
Equipment 6,025,146 1,817,265 7,842,411
Services 889,347 248,429 1,137,776
------------ ------------ ------------
6,914,493 2,065,694 8,980,187
Selling, general and administrative
expenses 3,119,916 621,846 3,741,762
------------ ------------ ------------
Total costs and expenses 10,034,409 2,687,540 12,721,949
------------ ------------ ------------
OPERATING INCOME (LOSS) (241,552) 629,747 388,195
INTEREST EXPENSE (OTHER) 93,517 36,282 129,799
------------ ------------ ------------
Income before provision (benefit) for
income taxes (335,069) 593,465 258,396
INCOME TAX PROVISION (BENEFIT) -- 201,778 201,778
------------ ------------ ------------
Net income (loss) $ (335,069) $ 391,687 $ 56,618
============ ============ ============
EARNINGS (LOSS) PER SHARE:
Loss per share $ (0.02) $ 0.00
============ ============
Weighted average common and
common stock equivalent shares 13,867,559 19,365,113(a)
============ ============
</TABLE>
(a) Includes the 1,500,000 shares issued to acquire HH Communications, Inc.,
for the entire period. Amount also includes all common stock equivalents
such as options and warrants, that were excluded from the Glasgal only
cloumn as their inclusion would have been antidilutive.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR YEAR ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
NET SALES
Equipment $ 34,763,949 $ 6,109,075 $ 40,873,024
Services 7,016,872 198,701 7,215,573
------------ ------------ ------------
41,780,821 6,307,776 48,088,597
------------ ------------ ------------
COSTS AND EXPENSES
Cost of Sales
Equipment 26,608,877 4,396,398 31,005,275
Services 4,044,360 30,623 4,074,983
------------ ------------ ------------
30,653,237 4,427,021 35,080,258
Selling, general and administrative
expenses 11,327,190 2,183,982 13,511,172
------------ ------------ ------------
Total costs and expenses 41,980,427 6,611,003 48,591,430
------------ ------------ ------------
OPERATING INCOME (LOSS) (199,606) (303,227) (502,833)
INTEREST EXPENSE 757,485 73,114 830,599
------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes and extraordinary item (957,091) (376,341) (1,333,432)
INCOME TAX PROVISION (BENEFIT) -- (87,754) (87,754)
------------ ------------ ------------
Income (loss) before extraordinary item (957,091) (288,587) (1,245,678)
EXTRAORDINARY ITEM (223,066) -- (223,066)
------------ ------------ ------------
Net income (loss) $ (1,180,157) $ (288,587) $ (1,468,744)
============ ============ ============
EARNINGS (LOSS) PER SHARE:
Loss per share $ (0.07) $ (0.09)
Extraordinary item $ (0.02) $ (0.02)
------------ ------------
Net Loss $ (0.09) $ (0.11)
============ ============
Weighted average common and
common stock equivalent shares 12,853,747 14,353,747
============ ============
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
NET SALES
Equipment $ 30,185,389 $ 3,088,518(a) $ 33,273,907
Services 4,975,909 6,798 4,982,707
------------ ------------ ------------
35,161,298 3,095,316 38,256,614
------------ ------------ ------------
COSTS AND EXPENSES
Cost of Sales
Equipment 21,205,812 1,745,158 22,950,970
Services 3,428,335 -- 3,428,335
------------ ------------ ------------
24,634,147 1,745,158 26,379,305
Selling, general and administrative
expenses 11,725,597 1,374,095 13,099,692
------------ ------------ ------------
Total costs and expenses 36,359,744 3,119,253 39,478,997
------------ ------------ ------------
OPERATING INCOME (LOSS) (1,198,446) (23,937) (1,222,383)
INTEREST EXPENSE (OTHER) (476,096) (25,926) (502,022)
------------ ------------ ------------
Income before provision (benefit) for
income taxes (1,674,542) (49,863) (1,724,405)
INCOME TAX PROVISION (BENEFIT) (31,753) 42,656 10,903
------------ ------------ ------------
Net income (loss) $ (1,642,789) $ (92,519) $ (1,735,308)
============ ============ ============
EARNINGS (LOSS) PER SHARE:
Loss per share $ (0.15) $ (0.14)
============ ============
Weighted average common and
common stock equivalent shares 10,681,237 12,181,237
============ ============
</TABLE>
(a) Net sales of HH Communications, Inc. includes commission revenue without an
associated cost of sale of $830,000.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
NET SALES
Equipment $ 9,359,921 $ 519,554(a) $ 9,879,475
Services 1,794,639 -- 1,794,639
------------ ------------ ------------
11,154,560 519,554 11,674,114
------------ ------------ ------------
COSTS AND EXPENSES
Cost of Sales
Equipment 7,332,807 27,415 7,360,222
Services 1,190,551 -- 1,190,551
------------ ------------ ------------
8,523,358 27,415 8,550,773
Selling, general and administrative
expenses 4,640,727 326,554 4,967,281
------------ ------------ ------------
Total costs and expenses 13,164,085 353,969 13,518,054
------------ ------------ ------------
OPERATING INCOME (LOSS) (2,009,525) 165,585 (1,843,940)
INTEREST EXPENSE (136,053) (9,379) (145,432)
------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes (2,145,578) 156,206 (1,989,372)
INCOME TAX PROVISION (BENEFIT) -- -- --
------------ ------------ ------------
Net income (loss) $ (2,145,578) $ 156,206 $ (1,989,372)
============ ============ ============
</TABLE>
(a) Net sales of HH Communications, Inc. includes $404,000 of commission
revenue which has no associated cost of sale.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
GLASGAL HH PRO-FORMA
COMMUNICATIONS, COMMUNICATIONS, COMBINED
INC. INC. STATEMENT
--------------- --------------- -------------
<S> <C> <C> <C>
NET SALES
Equipment $ 31,384,734 $ 897,295(a) $ 32,282,029
Services 5,006,440 -- 5,006,440
------------ ------------ ------------
36,391,174 897,295 37,288,469
------------ ------------ ------------
COSTS AND EXPENSES
Cost of Sales
Equipment 22,646,846 -- 22,646,846
Services 2,772,184 -- 2,772,184
------------ ------------ ------------
25,419,030 -- 25,419,030
Selling, general and administrative
expenses 10,422,509 807,012 11,229,521
------------ ------------ ------------
Total costs and expenses 35,841,539 807,012 36,648,551
------------ ------------ ------------
OPERATING INCOME (LOSS) 549,635 90,283 639,918
INTEREST EXPENSE (490,596) (31,020) (521,616)
------------ ------------ ------------
Income before provision (benefit) for
income taxes 59,039 59,263 118,302
INCOME TAX PROVISION (BENEFIT) 206,372 15,400 221,772
------------ ------------ ------------
Net income (loss) $ (147,333) $ 43,863 $ (103,470)
============ ============ ============
</TABLE>
(a) Net sales for HH Communications, Inc. represent commission revenue with no
associated cost of sale.
